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Friday, September 21, 2012

Short Sales still a fact of the current market…

I had another
short sale closing this week and have had more inquiries about short sales
lately. Short sales are still a significant part of the current market,
although, like foreclosures, they have declined as a percentage of total sales.

Just about
the only thing that most people know about short sales is that the sale of the
house is done for less than is owed to the bank. In other words, it’s a sale of
a house that is “under water”. There are lots of misconceptions about short
sales and some mis-information out there about them, too. I have created and
run a Web site just for short sales in Michigan called mishortsales.com. There is lots of good
reading material there about the process and the potential consequences on a
person’s credit and taxes. If you or someone that you know is contemplating a
short sale, that would be a great site to visit to find out more about this
alternative to foreclosure.

I get asked a
lot, “Can my family just buy the house in the short sale and rent it back to
me?” The short answer is NO! Due to the amount of fraud in the early days of
this recession, lenders all require the buyers and sellers to sign an affidavit
that specifies that none of the parties in the sale are related in any way.
That means that neither your relatives nor your in-laws can be a party to the
sale. The way the affidavit is worded, even a family friend would be excluded.
The bottom line is that you are not going to be in the house when it is all
said and done. It’s gone. You’re out. Deal with that and get on with life.

There are
lots of other questions that I get asked about short sales and they are covered
in the FAQ section of the mishortsales web site. One of the big points that I
try to get across at that site and help people understand is that a shot sale
is way better than letting the property go into foreclosure or declaring
bankruptcy. There are great articles to read about the credit and tax
consequences of the various alternative routes that can be taken.

Another point
that I make there is that this is a process that involves both real estate
issues and legal issues related to negotiating with the lender(s) involved. I’m
a Realtor® and I can take care of the real estate issue; however, I am not a
lawyer, so I engage the help of a company that specializes in short sale
negotiations and has lawyers on staff to help with those aspects. People
considering short sales should understand how both sets of issues – real estate
and legal – are going to be handled and by whom. I’m also not a CPA or
financial advisor, which is why I have links to articles on the
mishortsales.com website by people who are experts in those areas and can help
you understand some of the financial and tax issues involved.

One aspect of
short sales has remained fairly consistent – they take a long time. I normally
advise people looking to do a short sale that they should plan on at least
three months and as much as six months (sometimes even more) for the short sale
process. Even though the banks have been doing these short sales for years now,
they are still way understaffed and the internal process within the banks way
to convoluted and committee oriented. It can take weeks to even get an answer
to the simplest question or request.

And during
this time, the crazy thing is that the bank can be pursuing a parallel course
of foreclosure. Even though you have an accepted offer for the sale in-house
they will often continue that foreclosure process, which can be confusing for
the sellers, because they are getting two different sets of letters and
communications from two completely different groups within the same bank. The
problem is that the two different bank groups don’t talk to each other and don’t
know what the other group is doing. Crazy? Yes!

So is a short
sale right for you? Is it the right thing to do in your circumstances? Only a
meeting with your Realtor can tell. You can read about the process and the
things that you should have in order to pursue a short sale on my web site.
Also on that site are some guidelines about what the expectations are on the
banks, in terms of the reason (most often call the “hardship”) that they should
accept as your justification for the short sale. Read the stuff there and then
give me a call. We’ll discuss your situation.

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About Me

I'm a pre-Baby Boomer who just happens to be into technology and the Web. I created and maintain 6 Web sites - three for real estate (see above for links), one for the Milford Historical Society, one for teh Milford Car Show and one for my church. I've been a Realtor for a little over 10 years.
Prior to selling real estate, I had a 30 year career selling and marketing computers and related software and services for a variety of IT industry companies, many of them now long gone - Burroughs, Digital Equipment, Compaq, HP, EMC and SGI. I still keep up with what's happening in that space.
Now, I focus upon real estate, with a specialty in historic houses in and around the Milford, Michigan area. I'm also focusing more andmore on the needs of aging home buyers, since that is a category into which I fall myself.
I hope that you enjoy reading my blog as much as I enjoy creating it. Feel free to let me know your opinions or to add your comments to mine. I also have another blog - normsmilfordblog.com that is a bit more unpredictable in its content. Try it if you haven't already.I'm also on activeRain, Facebook, Linked In and Twitter.